“The market took it in stride”
Inflation rose at the fastest rate in more than a decade last month, but CNBC’s Jim Cramer called it Wall Street’s worst-kept secret and said the stock market had caught it in. the stride.
The consumer price index, which measures the cost of a basket of goods such as food and energy, increased 5% year-on-year in May, according to the Ministry of Labor. Although high, it was just a little above the 4.7% gain expected by a Dow Jones poll.
“When everyone’s expecting a scandalous government statistic, then it’s not really scandalous when you get it,” he said on “Crazy money“So when the Department of Labor announced a scorching inflation figure this morning… the market picked up on it. “
Inflation reached its highest rate since August 2008, yet the S&P 500 rose 0.5% to a record close of 4,239.18.
Despite the rise in prices, the Federal Reserve is unlikely to change its stance on interest rates, Cramer said. Central bank officials plan to keep rates near zero to allow the U.S. economy to rebound from last year’s Covid-19 slowdown.
“There are too many things that went wrong last year, and most of them won’t be fixed by higher rates,” Cramer said. “Businesses just weren’t prepared to handle such a strong economy, but it’s a high-quality issue and they don’t need a rate hike to fix it. Time will do it for them. . “
Fed Chairman Jerome Powell has said the central bank will allow inflation, which he says will be transient, to exceed its 2% target. The federal funds rate, which influences lending, will not rise until the labor market fully rebounds, the Fed said.
The country has more than 7 million jobs to recover to reach this goal, with an unemployment rate of 5.8% last month.
“I think Jay Powell’s gradual approach is cautious. I bet he’s going to be right,” Cramer said.